tv Bloomberg West Bloomberg August 23, 2016 11:00pm-12:01am EDT
mark: i'm mark crumpton. you're watching "bloomberg west." heartbroken is how president obama says the nation feels after the flooding in louisiana left 13 people dead and destroyed homes and businesses. the president said it's time for washington to do its part. president obama: when we know how much permanent housing is going to have to be built, when we have a better sense of how much infrastructure has been damaged, what we need to do in terms of mitigation strategies, that is when congress may be called upon to do some more. mark: the federal government has approved more than $120 million in aid for residents affected by the flooding.
a u.s. official says the fbi is investigating a cyber attack targeting reporters from the "new york times" and is looking into whether russian intelligence agencies are responsible. a spokesperson would not confirm the attacks or investigation. hillary leads donald trump i-16 points in virginia. the poll has clinton with 55% and trump with 36%. in a four-way race, libertarian candidate gary johnson earned 8%. global news 24 hours a day powered by more than 2600 reporters and analysts in more than 120 countries around the world. i'm mark crumpton. "bloomberg west" is next.
emily: i'm emily chang and this is "bloomberg west." tesla's tinkering under the with hood. better batteries and an overhaul of autopilot. we will hear from pittsburgh's mayor about their pilot uber and how pittsburgh plans to remake itself as a manufacturing hub of the future. and the front page of the internet is answering your questions. we are talking to the cofounders of reddit, covering every thing from ad blocking technology to free speech on the web. first, to our lead -- elon musk is vamping up tesla model's telling investors to expect new versions with more powerful batteries. they can now cover up to 315 miles on a single charge. musk also appealing to sports car enthusiasts saying the improved model would be up to accelerate to 60 miles an hour zero in 2.5 seconds. here to break down the significance of these new features is david welch from our auto team in detroit.
how significant is this announcement? david: what he talked about today is marginal and kind of incremental, but there is some significant marketing news. he can say he's got the first car that can go over 300 miles on a single charge and bragged that the model s is going to be the fastest car in the world you can buy at retail. it is going to beat ferrari and porsche and it is an electric car. from his point of view, this is good news that he can boast about and prove to the world this technology can go toe to toe. emily: let's talk about autopilot -- lots of questions given the investigation going into the fatal crash. google and alphabet saying they
are focused on fully self driving cars and not semi-autonomous cars like tesla is working on. what did he have to say about autopilot? david: his biggest news is he's getting better battery power. they continue to work on autopilot and they are continuing to beta test it so that it is ready for people to use down the line without having their hands on the wheel. people have to keep their hands on the wheel with autopilot and it's not fully autonomous. no one has one on the road that is fully autonomous yet. emily: interesting news coming from delphi and mobilize who say they are teaming up to create an entire self driving system. what does this mean and how would it work? david: this could be significant. the israeli company makes sensors and cameras and mapping capabilities required for self
driving cars are getting together and it's going to be a lower tech system. it's going to be a camera aced system and they may be able to get cars to market faster than a lot of big companies are talking about. the other significance is smaller companies like subaru and mazda, those that do not have the big box to put into big self driving programs like general motors or google, they could actually get a crack at this technology. it is almost an open source version. emily: would this be a one-stop shop for self driving cars? david: it could be because they will do business with anyone who wants to use their equipment and get it on the road quickly. emily: david welch joining us from detroit.
thank you so much for that that. something we will continue to follow. last week, we found out pittsburgh is uber's city of choice where they will ride specially fitted volvo suvs that will be supervised by humans in the drivers seat for the time being. i sat down with the city's mayor and asked when he first started speaking with uber. guest: the initial conversations happened almost 18 months ago. travis and his team had then -- been looking for a city to create an innovation center for autonomous vehicles. they started talking with carnegie mellon university and over the course of the past six months, we've been advancing the driverless cars in limited areas of the city and over the course of the past few weeks, we took it to that next level to actually call it up on your app
and use autonomous vehicles. emily: why do you want pittsburgh to be the guinea pig? it's exciting but it is also unproven. guest: it is and it isn't. for over a decade, pittsburgh has been using driverless cars and uber has been all over the city with it. i got to be the first person to use the vehicle itself, ending a night by having travis and his team pick me up and take me home. there's no difference in a car and at the same time, safety is coming first. it will already have a driver in the driver seat. the technology has been ther for sometime and this has been the time to take it to the streets.
emily: have you polled residents? guest: this is an issue we have been working with not just with uber but the u.s. department of transportation. secretary fox and his team, one of the issues we have worked on is cyber security. uber is using a lot of cyber security expertise. the department of transportation putting requirements that look at safety first. whether it is inoculations, whether it was aviation or now with mobility and autonomous vehicles, there's always a test period and it has positives and negatives that come with it. emily: give us some legal clarity on how this will work. how does the city see uber's cars today? guest: presently there are gues't presently there are autonomous vehicles on the streets. every car being produced right now, every car coming out of
detroit and around the world is being equipped with sensors. those cars will have the ability to speak with each other and presently, they could already do it. the vehicles could also be talking to traffic signals. there will be sensors that cities will put up. it's a radical change in the way we view urban transportation. emily: you mention that there will be two drivers in the car. at some point will it be legal to drive without the safety driver? is this a job killer or job creator? guest: in pittsburgh, uber has employed 500 people from around the world to work on this project. i anticipate over a thousand people will be employed as you see the transition from heavy industry city 30 years ago and the city that one through economic collapse, you see a new city emerge were uber, google, microsoft, disney, oculus, apple
and all of these companies are creating a global innovation center in pittsburgh. the cities that get out front will be the leaders and they will be the cities were other companies will locate and where the talent will locate. what i want to see happen in pittsburgh is that we not only build the technology but start manufacturing the parts as well. advanced manufacturing will be a critical component in building an industry for all. emily: that was the mayor of pittsburgh. as the battle for the ride hailing customer heats up, here's a statistic -- uber is the most used taxi app in 108 countries. uber has struggled in asia or where local operators reign supreme.
best buy surging as much as 19% for its biggest gain in a year. signaling to investors that the ceo's turnaround plan might be paying off. they have been hit hard by online shopping and weakening demand. best buy saw a 24% increase in online sales in the same time as the prime day sales event. best buy cited a boost in wearable sales that helped to lift shares of fit bit and gopro as well. not long ago, joining the unicorn club was the most sought after bragging right in silicon valley. startups are eager to simply proclaim their profitability. hotel tonight can claim that title. it's one of the few that went from burning millions to planning an ipo.
joining me here to discuss it is the ceo, sam shake. you've gone from burning millions to operating in the black. how did you do it? sam: we decided to focus on profitability. we wanted to own our own destiny. we were in a climate that was changing fast and dramatically from fundraising and we were able to raise a lot of money and then we saw that pullback. we said we are going to own our own destiny and make that the sole focus of the company. that's the number one focus and from that came a ton of tactics which we could spend hours talking about. we reduced reliance on coupons and discounting. hotels give us room that would
go unsold. it's great values for customers and the best prices out there, absolutely. we would supplement that for trying hotel tonight and the product stood on its own. we did not have to provide that discount and we were just cannibalizing the existing sales. growth continued and in many cases accelerated. emily: did you end up fundraising? sam: we did not need to. we hit it in april and we were able to announce publicly that we achieved that goal. emily: you say you are planning to go public by the end of the next year. walk me through the next 12 months or so. sam: i talked to my advisors and said what is the next goal? i'm very competitive and have
always wanted to go public and have a company i started and take it all the way through. that's when i was 22 years old. i'm personally very motivated by that and i think it would be a wonderful experience for the team to go through. the next logical step for controlling our destiny and we think we can get there before the end of next year. emily: often the finances of silicon valley projects are closely held. why are you being so public about this? sam: if i looked for us to be public one day, the information is going to be shared then or as we get close to going public is even more than what we are sharing right now. i want the world to know that even though we went through some difficult times, we are thriving right now. we did not do that at the expense of growth. we have a great pipeline coming
out in the fall, so i love to talk about it and it's fun to talk about and brag about the great work the team is doing. emily: we have seen a lot of m and a. would you be open to a sale? sam: we are very focused on growth and maintaining profitability, focused a lot on innovation. we are focused on things we can control the destiny of, which, for us is a public offering. i think the markets will come back within the timeframe we are looking at and if not, we will have the position to hold out as long as needed. emily: expedia and priceline dominate the market. their gross bookings are 100 times what hotel tonight's are. what makes you think you can make it as a public company? sam: we are focused solely on
last minute, the temporal dimension. we are actually a week in advance, so we have 50% of the market opportunity right there. and we are mobile only. that cuts the market down considerably. the other guys sell cruises and flights. our revenues right now are today growing compared to 15% for our competitors. when people see the product and the value proposition we offer, we see them come back over and over again even though gross bookings we have are smaller, our marketing costs are far smaller than theirs. emily: what is your advice to other startups that may be in the position you were six months ago? sam: when i look back on it, i thought it was a mutually exclusive decision.
we as a team should have been thinking about how do we improve unit economics and keep profit ability at that transaction basis in place and have the leverage to pull back if needed? it was not a binary decision. it should be something we look at together. if a company is looking that way, they will be positioned for success. emily: good to hear how you learn from your own experiences. great to have your the show. up next, we will look at what is to blame for most flight delays. it's not the weather. this is bloomberg. ♪
after it was valued at 900 hundred million dollars, it went for less than $30 million in its sale to bed, bath and beyond. this comes after two successful e-commerce acquisitions. walmart's purchase of jet and unilever's deal with dollar shave club. earlier this month, delta suffered the wrath of thousands of angry travelers when it disclosed a single power outage crashed its system and lead to 2000 flight cancellations. another computer failure at southwest in july led to 2300 cancellations and will cost the carrier tens of millions of dollars. are these kinds of delays happening more often? who is to blame? our aviation reporter has been looking into the cause of most u.s. flight delays and joins us from washington with all of those details. it used to be the weather and air traffic control that caused the problems. now you say that it is just airlines. how often are computer glitches causing problems?
guest: the computer problems we have seen, devastating as it was for those people are probably not the biggest cause of delays. it's a more mundane mix of aircraft at the wrong place, maintenance problems, pilots who may have worked too many hours and cannot continue, things like that. but it is true that airlines like a lot of his this is our very reliant on their computers and so when they do go down, it can be devastating. emily: why is the technology used by airlines so outdated? alan: you could argue both sides of that. if you have a computer crash, it is outdated. the airplanes themselves and the air traffic system, in spite of what critics say, is quite a sophisticated, interlocking
network of computers. it's quite impressive if you consider what it does and its safety record, which is really amazing. we haven't had a fatal accident on a u.s. carrier in years and years. so that is in the backdrop of what is going on here. the reliability is quite amazing. emily: delta ironically has the best on-time record of any carrier. should we be concerned that safety was in question with these issues? alan: i don't think there's any question that safety was compromised with the computer outage. the reason they are putting their planes on the ground is to be cautious. so that's not really a concern and it is born out why the accident statistics we see worldwide, which are amazing compared to 20 or 30 years ago. reliability is another question
and that's what we are looking at here. emily: what's the solution? what are airlines doing and what are they getting better at? alan: the data we looked at showed delays caused by the airlines have exceeded those caused by weather and that sort of thing. it doesn't show what has caused the accident, which is a little tricky to talk about. you have a group of companies that have gone through bankruptcies and have cut costs and staff, have lowered the salaries of a lot of their staff and i think what that has done is cut into the reliability of some of their systems. the way to improve that is to add extra aircraft so if one aircraft arrives late, you can throw in a substitute.
anchor: top stories this hour. index downrket -- an the most in three weeks. after data showed a jump in crude stockpiles. qantas shares took off. the airline will pay out seven australian cents a share and buy back stock. the ceo told bloomberg television he hopes to exercise options for 45 more boeing
dreamliners. -- the firstay time since february. they will auction $7.5 billion worth of contracts in open market operations on wednesday. the policymakers want to limit the use of shorter-term borrowings. --bal news, are owed by powered by more than 2600 journalists. let's get the latest from the markets now. we are seeing a mixed market. thed: the last time, on story. speculation they are probably trying to push these maturities to become longer permit equities looking mixed. if there is one takeaway, volumes are on the way down. more pressures on emerging
market stocks ahead of jackson hole. hard to come away with one message. aders areeem trit trying to position for a hawkish that. you have a look at the big currencies on the decline. the south korean won on the way down. the philippine peso. let's talk about this. you talk about the treasury yield, we are stuck at the type of trading range. on a daily basis, you go back to 2012, we are at the narrowest in a decade's time. mind the forecasts have been for interest rates to go up to read it very quickly, have a
look at this. got stuck ahead of the jackson hole meeting. emily: this is bloomberg west. i'm emily chang. welcome to our special on reddit. over the next half hour, we will answer the dozens of questions posted in the last week with topics ranging from work and life balance. but first we have to discuss reddit as a business. from getting rejected by y combinator to convincing the ceo
to change his mind. the site hosts over 240 million act of users and 340,000 posts a day, but they believe it can be so much more. joining us now are two of the reddit cofounders. you came back as ceo last year and you came back as strategy officer. you guys have known each other since moving day at uva. you have an together a long time. guest: 15 years. guest: that's a healthy marriage. emily: tell me where you think you have made the most progress and where did the most challenges remain? guest: the biggest thing we have been focused on in the last year is building the team at reddit, getting the team in a position to build and execute all of our dreams. we've rebuilt pretty much every team at reddit and we've shift pped more in last quarter than the entire year before that. emily: what are the biggest things on the to do list? guest: we've got work to do, but we've made a ton of progress in
short order. the team we have put together has seen a vast improvement in mobile web and there's more room to go. they're certainly more user experience improvements, but the growth speaks for itself. emily: we are going to talk about growth and the user experience, but i wanted to start on the business. we have been taking questions from reddit. one of the first -- looking forward, how you plan to monetize reddit community and how has the pressure to become profitable change the way web businesses are operated now? guest: the first part is how do we monetize and that is at stop ds. we've explored a bunch of is this models but adds make the most sense for us. it's a space we were already living in and that has been getting better and better. emily: give me some color on that. guest: advertising on reddit is
different than elsewhere. advertisers elsewhere online or off-line, they are yelling at their customers. you are trying to say your message in the flashes them loudest way possible. on reddit, you can make a genuine connection. it's more akin to speaking to a customer in their home. when an advertiser embraces that , speaks to their customer authentically, you can get a real connection. emily: here's another -- are you worried about competition? reddit has gone unchanged and unopposed for a decade. are you concerned someone could sweep away noncore users the same way reddit did to digg in 2010? guest: we are so focused on providing a great user experience -- we would not go on
some kind of fool's errand like other startups have made in the past. emily: but there's so much competition -- everything from twitter to facebook to snapchat -- guest: one of the best pieces of advice i was given early in our career is that if you spend so much time looking in the rearview mirror, you will drive into a wall. we just look at the future of reddit and that's always been our guiding light and has served as well. emily: like many websites, reddit's business model is being challenged by ad blocking software. what is going to your mind as you battle this shift and how to keep the business forward facing and agile? guest: never lose track of why users are coming to your site. if you start sacrificing that, you will start having a bad time. one of the huge assets we have is this is the zeitgeist for a quarter of a billion people. and it is a brand pot stream dream comeit is a
true because word-of-mouth is the most powerful form of advertising. emily: how do you balance being true to the user and not letting things get out of control and turning this into a real business? that has been the main challenge over the last years. guest: yes and no. there's a way to advertise on reddit that's not subtractive from user experience. like when you make a real connection. customers exist because they need something from the brand. that can be a powerful thing. we try to think about how we can do that a way that doesn't distract from the product. so that they are not at the expense of the experience but neutral or positive guest:. reddit is in a fortunate position because a brand like coca-cola can run an ad on reddit and during the super
bowl, and ad about an ad and engagement on that was higher engagement than content on reddit. they can make a great investment but they are also making a real influence. emily: condé nast -- you guys in 2006 and spun you off in 2011. do you wish over the last decade they had help you build up the business? guest: in a lot of respects, they were. when we sold the company in 2006, we were both 22. we didn't know a lot about running a business. at the time, i regretted it. this thing keeps growing and we did not need to sell. but when i reflect on it now, that it was a good home for us to learn how to operate business and learn how to manage and grow. now that we are independent again, we can bring those lessons back. i'm not certain reddit would have survived without it. it's not a sure thing.
change this but do you think trolls are huge problem? guest: in the last quarter, we've reduced spam by 90% and abuse by 30%. emily: how do you do that? it's difficult to crack down without pissing people off. guest: on spam, it's finding where it's coming from and eliminating it. abuse, letting users block other users has had a big impact. we have a long way to go but we are making steady progress. guest: to put it in perspective, quarter of a billion people will hit reddit this month, a population larger than brazil. of all the content they are producing, only .02% gets reported. in that context, it's a remarkable environment. emily: some of the criticism goes beyond this -- they say it's a way to organize trolls and spread across the internet.
this is what ellen pao tried to crack down on. it did not end well for her. she did ultimately leave. how are you balancing not alienating your core users and cleaning up the site? guest: our core users are overwhelmingly good and positive. we've eliminated number of communities over the last year. some of it more dramatic than others. but now that we have set the community with what is acceptable and what is not, it's become easier. it's about setting boundaries and enforcing it consistently. that's the name of the game. emily: in the week leading up to this, we were taking questions on reddit and a lot of usernames were too offensive to use. some of them involved my name. how are you making reddit safer for women in particular? guest: it is a big thing on our minds near constantly.
our mission is to make reddit as welcoming as possible. there's a lot of work we're doing, connecting people with their home on reddit. it's not an easy problem, but i think we have made strides toward it. there is still plenty of work to be done. emily: and it's not just women, but minorities and anyone is not a straight white guy. guest: according to recent data, 49% of redditors are women. one of three women will hit reddit this month. it's a large and diverse population and we are doing a better job every day. we did not have a trust and safety team one year ago and we do now. it's making sure people get the safe experience they want. guest: one of the largest women's communities online is on reddit. emily: reddit has taken some strong stands on the matter of
consumer privacy and has been a leader in the field. what business case can you share that may change the minds of businesses that have not caught on to the importance of consumer pribvacy? guest: it's important for any business to have a good relationship with their customers. for us, it's about maintaining trust with our users. we also think it's very much about minimizing the surface area. we don't require e-mail addresses. it up for the users to share what they want. if we were to get attacked by that sort of thing, don't ask a lot, don't take a lot. do the right thing for them. that makes good business sense for any company. emily: here's another one from a username that we cannot say but they do listen to bloomberg radio. how does reddit check the
balance between freedom of speech and privacy? guest: i would say privacy and freedom of speech are not conflicted. privacy is something that has always been important. we believe anyone on reddit should be able to express themselves fully. on reddit, you can be your true self and that's a powerful thing. people come seeking relationship advice or help when they have suicidal thoughts or coming out for the first time. these are powerful things people experience. when it comes to law enforcement, we hold a very high bar. we make sure requests are valid and authentic and push back when they are not. in fact, we did that about one week ago when we were sued by atlantic records for user data. it's not something we hand over. emily: reddit has been known as the front page of the internet and the idea is to turn this into a full-fledged media empire.
you delve into original content. how are those experiments going? guest: well so far. we have doubled down on are publisher tools and we realize so many publishers, newsrooms starting the day reading their beats on reddit. if you cover science, you are reading it and they tried to turn that into content a would publish on their own site. by eating dog food ourselves, we realize these are the tools we need to be building. at the end of the day, it builds a relationship with people who do the best job. emily: in two years, where do you see reddit? guest: we should be significantly bigger and revenue should be up significantly and i think we will make progress
against the biggest problem we have -- how do we connect first-time user with their home on reddit? i believe every person has a home somewhere on reddit because we have 45,000 active communities right now. there's something for everybody. that's the challenge we are chasing after right now. guest: the magic behind reddit lays in that pseudonymity. you can really be yourself. you can talk world politics, learn about communities and the kinds of connections people make on reddit will be as strong or stronger, i would argue that the connections they make on other social networks. emily: we will be talking more about why commentator, where you got your start. it is a number two of demo day. we will be right back talking about reddit. this is bloomberg. ♪
emily: y combinator's demo day is underway. reddit got its start at the incubator 11 years ago. its original application over the weekend on facebook. talk to us about their role in the evolution. how involved have they been over the course of this 11 years? guest: you mentioned that pg did reject us. jessica livingston fought to bring us back. she's the reason that we got in and we will always be grateful. emily: here's a question from a reddit user -- how did they help you and do you still keep in touch? guest: it has helped in
different ways but he met a lot of our closest friends there and our closest business confidence ants were people that we met, the founders of which were in that batch with us. we grew up together and we learned how to hire, fire and raise money. it was an incredibly valuable experience to have. guest: especially in 2005. there were not a lot of resources and the support group it provided to share notes was invaluable and even more valuable today because the network is so much bigger. you may not get a response instantly. it just gets stronger with every batch. emily: paul graham has given a lot of advice over the years. what applies and what doesn't
? guest: i'm not going to get into what doesn't. one of the most important pieces of advice we received is to launch as soon as possible because until you launch, you are not learning. it's a day you learn whether your ideas going to work or not so how you have to change to make it work -- i remember before we started coding on reddit and it's nothing like you see today, but we learned so much just by iterating. emily: how many companies were in the batch? now they are funding hundreds of companies and they are sometimes criticized as a start up company that valuations are overinflated just because their name is attached to it. guest: i was a partner for a
time there. the benefit of those three months is a huge multiplier. when you can call up and get feedback and get smacked around and focus on what matters, it makes a huge difference and those valuations are a result of the fact that they are much better off. emily: here's another question from reddit. when was the moment you almost gave up and what old you -- pulled you through? guest: i don't know if there is the moment, but there are many moments. when you are a founder, especially first-time founder, channeling what your motivation is. sometimes it doing the best thing for our users. sometimes it was not letting alexis down. i don't want to look stupid. i think it is important to know
why you are working. it's not always a pure motivation. it's not always am going to change the world. every time you have an up, there's a down. you know you are going to get through and just go along with the ride. emily: last click question -- if you had $40,000 and you are going to start over, what would you do? guest: we started reddit with $12,000 and we would do about the same thing. emily: the chief strategy offers icer. thank you for stopping by. great to have you. that does it for this edition of "bloomberg west." tune in for full coverage of hp